A Caddy is basically a container that holds something. For example, the very early CD-ROM drives came with an external container that would hold and protect the disc. This Caddy would then be inserted into the drive with the CD instead of simply placing the CD into a computer. Notebook manufactures usually place 2.5 inch notebook hard drives inside a caddy to add some extra support around the disk drive and to also make the hard disk easier to remove from the notebook.
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